Banking

The US economy is going downhill - time to cut back?

The economy is getting tougher. Business Success Coach, John M McKee, provides some tips he's learned about whether you should you cut back or continue to grow your business during difficult times.

Recent news items:

-Monthly car sales down again.

-Homes sales continue to plummet.

-Financial markets tank in all sectors today.

-US Dollar at lowest levels in 40 years.

-Inflation continues growing, and the Federal Reserve Bank can't tame it.

Recently, every report we see indicates that things are getting worse in the US. And they're probably true. Compared to where we've been, the outlook is bleak. According to some pundits, it's highly likely that the worst is yet to come.

If you're a business manager with budgetary responsibility, what's the best course of action?

When a company's revenues are down from plan, is it prudent to continue spending like your original budget called for? Or, with a "real world" mentality, is this the time to start hacking away at the budget's lines in an attempt to maintain some semblance of a profit by the time year-end rolls around?

These are tough decisions. It's during times like this when we can really see how people act in a crisis. Great leaders seem to know - inherently - what's right. The rest of them seem to make the wrong decision every time. Here's what I am discussing with my clients:

1. Resist issuing a universal decree affecting everyone, and all departments. I realize this may seem like a "fairness" issue. After all, isn't it more "fair" to tell everyone to cut back equally? But this environment - especially one that is changing more quickly every year - just isn't fair. As a decision maker, you are paid to make good decisions for the company. This is where you show your leadership skills and your value to the organization. Don't use a one-size-fits-all approach which will hurt the organization later. 2. Use this time as a training opportunity. Whether or not you've been through similarly tough times yourself, this is a great time to help your subordinates learn how to become quicker on their feet. Don't simply accept your team members' statements that they can't do what was asked of them because of crappy "market conditions"." Challenge them to become more creative. Ask what they'd do, for example, if this was their own company -where would they look to save small amounts of money while at the same time trying out new ways of doing things with existing tools? 3. Fund the winners. As bad as things are, in most companies there are still good opportunities and sound business decisions. Build your business wherever and however you can by putting limited resources (financial or human) into those pockets of potential. This economy is going to hit bottom at some point and then it's going to move ahead with vigor. When it does, make sure your organization is in a position to capitalize on the best opportunities versus just playing catch-up. 4. Two ears and one mouth. I find it both scary and sad that so many managers think they know all the answers in difficult times. Perhaps it's some attempt to show "leadership," by going around telling their folks to stay the course, or offering platitudes such as, "Don't worry, we'll make it through all this."

Most western countries are now witnessing more company failures and acquisitions than at any time in the last 50 years. Everyone is reading about companies that are laying off individuals in greater numbers with each month. Playing prognostic isn't going to instill confidence - but it may make you look like a huge BS'er. Communicate with everyone. Frequently. Ask for ideas. At the very least, allow people tell you their concerns. If you have a plan or some good strong ideas - share them. Let others know that you care, and are focused on getting past this temporary setback.

5. Celebrate the victories. At some point, some person or team is going to do something newsworthy. Make a lot of noise about it! When people are feeling down, it's very motivational to see their counterparts winning; so share the news widely each time you have some. Use these wins to celebrate your people and their successes in a manner as fun and big as you can afford. That doesn't mean being lavish - it can be a great e-mail message, a coffee break "party," or a funny sign outside someone's cube. The fact that you - personally - are aware, and celebrating, with your team will make a big difference to the overall attitude and morale.

Great leaders bond their teams during good times and bad times. Well-bonded teams perform better in all economies. And the people who make up those teams are more satisfied with their jobs and life in general. Great stuff during a slumping market.

john

Leadership Coach

About

John M. McKee is the founder and CEO of BusinessSuccessCoach.net, an international consulting and coaching practice with subscribers in 43 countries. One of the founding senior executives of DIRECTV, his hands-on experience includes leading billion d...

15 comments
yfjdgfutyu
yfjdgfutyu

Economy in the United States grew in a very slow pace this last fall. People are very much affected by painful credit crunch and their behavior are very much affected by it ??? making them more cautious. Economy is the biggest talk in town. I???ve been hearing industries asking for emergency cash amid a recession. It seems everywhere I turn there???s bad news about the economy or about payday loans. So I went in search of some good news. I knew there had to be some companies and industries out there that were doing well. Turns out, recession is actually good for some industries such as discount, retail and fast food. Particularly, places with dollar menus are doing very well. And, of course, as unemployment rises, so do video game sales. Some of the things in this article on the payday loans blog about industries that do not need emergency cash is somewhat surprising, though.

shyamal_r
shyamal_r

Why is that always Uncle is responsible .....Let others have economy which is crash proof .........does not even bother to look at Uncle's Raj

mikifinaz1
mikifinaz1

Wait until the rest of the world cuts the connection between the dollar and oil and finds out that our currency is not backed by anything; it is a fiat currency. For those of you who don't know what that is: a fiat currency is not backed by any real medium like gold or silver so in effect it is only worth the paper it is written on so the government can prints as much of this "funny money" as it wants. wonder where "inflation" comes from? This is the reason and for any one who cares, read about post world war one Germany to see where this leads. Or from the "Wizard of OZ" "Who is that man behind the curtain?"

normhaga
normhaga

I probably see things a little different than many of you and what I see is that the U.S. is losing its manufacturing base. Simply put, to be a consumer society you also have to be a producer society. You need some way to pay for your purchases. There is an element of truth to the assertion that most items have a higher quality due to modern manufacturing processes. It is also true that most of those items are manufactured off shore and imported. The U.S. does not manufacture its own ammunition anymore, it is off shored for lesser cost. When was the last time you could find, let alone purchase something other than a trinket or a very high cost musical instrument that was manufactured in the U.S., let alone with all the components manufactured in the U.S. as well? It is often said that it is best not to name the devil you fear. The word being out that the sky is falling may have the effect that everyone acts as if the sky is falling, even if it is not. I think psychologists call this 'mass hysteria.' The housing market is falling, but is this the result of an equalization of market forces? Over the last ten years housing has risen. Builders jumped in an did their thing and created a glut of high cost housing. The economy is in shambles by my belief because of out sourcing, illegal immigration and corporate profiteering, so that there is less money available to the population for non essential purchases. They don't purchase the new house - car - guitar and sales fall. Even if they remained constant, the monies are off shored and not recycled into the countries economy. If they, the people, believe the economy is failing they also do not purchase - same result only based on belief.

donflew@mfx.net
donflew@mfx.net

The US economy isn't going downhill. The "recession" that the drive-by media talk is really a decline of amount of growth. So it's not growing as fast as we were before... it *IS* still growing! Consider the premise you are basing your gloom and doom on: Recent news items: -Monthly car sales down again... Cars are better than they used to be. I don't need a new one every two years. -Homes sales continue to plummet. It's a house... wood and stone, not gold and silver. -Financial markets tank in all sectors today. as reported by and affected by the media... -US Dollar at lowest levels in 40 years. The governments fault, not mine. -Inflation continues growing, and the Federal Reserve Bank can't tame it. Of course the Fed can't tame it... it's Congress that can't live within it's budget. Recently, every report we see indicates that things are getting worse in the US. And they are probably true. Compared to where we havve been, the outlook is bleak. According to some pundits, it's highly likely that the worst is yet to come. Pundits... argh... don't believe everything they say.

Dr Dij
Dr Dij

the feds can't tame inflation, since their one available tool, adding money to the economy, is like an air pump. They only pump air into the basketball, it grows larger and finally bursts. Raising rates isn't taking money from the economy. Can you imagine them saying 'give us some of your money, we need it to fight inflation', it is simply cutting back on the expansion. I hate to be so cheerful but we're doing what the Roman's did in the last days of their empire - they kept printing money to pay for an urban permanent welfare class and the money they gave farmers for grain became so worthless that the farmers refused finally to send grain to Rome. And we're doing something the roman's didn't in addition: borrowing trillions that won't be paid back in your lifetime, so much the national debt is something like a third of the budget. Plus committing to wealth re-distribution programs we don't have the money for.

Starrdaark
Starrdaark

"Who is that man behind the curtain?" may indeed be the question to ponder. As "catseverywhere" stated in a previous post in this blog, [Of course you know the fed is a private, foreign owned corporation and not any part of any government. I am shocked by how few people know this. Henry Ford once said if the American people understood this banking system, "there would be revolution in the streets tomorrow morning."] Let?s see...the Federal Reserve is a privately owned entity. The Federal Reserve is also an entity which sets policy on government-enforced mandates; policies which have a critical effect on U.S. economy. Anyone see potential problems and conflict of interest here? Perhaps we should place the Fed and its elusive ownership under the microscope. However, one must first have a specimen to place between the glass.

sboverie
sboverie

A national economy is like a portfolio, the more diverse it is the better it can handle economic shocks. The US manufacturing capacity is under utilized and so much has been off shored that every industry relies too much on cheap labor to make a profit. The government's role in the economy is simply growth and stability; the bad news is that the government has been focused on growth only. To do this, the government has been on a wild spending spree. This is not tax and spend, this is borrow and spend. In the moral fable of the "Grasshopper and the Ant", the grasshopper did nothing to prepare for winter, but the ant worked all summer to store up enough for winter. The US failed to save during the times of plenty and now that an economic winter has set in, we don't have enough saved up.

$dunk$
$dunk$

I don't know what it's like where you live, but where I live my income has gone up about 10% in the last couple years but my buying power has gone down at least 25%. So in your world, does that still mean that my economy grew? In mine, that means it shrank at least 15%.

Dr_Zinj
Dr_Zinj

George W. Bush & Co haven't the foggiest idea about how to manage budgets. But don't dump it all in their laps. They are inheriting a fiscal model that was effectively put in place a long time ago. The worst offenders for this cycle are Reagan, Bush Sr, Clinton (both of 'em) and Bush Jr; all of them thought in the short term only and didn't take into consideration what could happen in the long run. That's one of the major problems with a government that gets elected on a popularity contest every 2, 4 and 6 years - it's a truely rare person who thinks about the long-term good of the country; and an even rarer one that lasts through the next election after taking an unpopular but necessary step.

catseverywhere
catseverywhere

The whole purpose of the "federal reserve system" is as a transfer of control/transfer of wealth mechanism. The "personal income tax" is merely a way to burn federal reserve notes, erase them as it were, to prevent Wiemar Germany-style hyper inflation. There are other mechanisms, but erase "credit" from the books they must, as fast as they create it, in order to keep appearances the "currency" is stable. Of course you know the fed is a private, foreign owned corporation and not any part of any government. I am shocked by how few people know this. Henry Ford once said if the American people understood this banking system, "there would be revolution in the streets tomorrow morning." But this time the gig is up. They have nailed the throttle full-open and there is nothing that will stop the inevitable collapse. This has all been planned. They are attempting to create a "North American Union" out of the ashes of a ruined US economy... accomplished through monopoly mismanagement (intentionally so) of the "money supply." The Economist magazine reported this plan back in the early 90's. The cover story was about a "new currency" they called "the Phoenix," that would unify North America by 'rising from the ashes' of a dead United States. They stated back then that due "fed policy" this was an unstoppable "done deal," this 16 or so years ago... Reagan got his wrist slapped when he let fly with a) that the government has no input whatsoever on fed policy and b) that not one dime of your "income tax" goes to pay for anything. Did you know Hinkley's dad was meeting (or was supposed to) with one of the Bush children (in Colorado) the day Hinkley shot Reagan? BTW you don't elect anyone. Electronic machines (and other means) have been used to steal elections in the US going back to 1964. Do you honestly think anyone really voted for McCain in such numbers? He's anointed to take a dive, exactly like Kerry did in 2004. The dirt on that guy is massive. But then none of them are worth a lick. Puppets. You don't get press time if you're not a good little global fascist minion. Do look into vote fraud if you're unfamiliar, that deal is a lot worse than most people realize.

sboverie
sboverie

The economy is having problems, but, don't put the full blame on the Fed. The problem is that nearly all government policies are inflationary. There is a business cycle that has periods of growth followed by periods of recession. Recession is not all bad, it is the time where bad decisions meet reality. A recession is also a time where the playing field can be re-leveled. Long periods of sustained growth tends to concentrate resources in the hands of few and recessions tend to break up those resources. This downturn is going to be nasty because the US has crippled its manufacturing sector by shipping manufacturing overseas. With real estate and banking tanking, we don't have much to fall back on. What is the point to have cheap goods if people can't buy them? Recessions are a good time for those who are able to find opportunities. This is the time to look at the future and be optimistic.